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Do Tax Cuts Lead to Economic Growth?

The economic growth that actually followed [tax cuts]— indeed, the whole history of the last 20 years — offers one of the most serious challenges to modern conservatism.—DAVID LEONHARDT

Daily, it seems, I hear Republicans advocate tax cuts as the answer to significantly improving the economy. It’s the basis for saying let’s reduce taxes in order to reduce the deficit, because the economy will get so much better tax revenues will be more than made up.

Check out this New York Times 15 September 2012 article: “Do Tax Cut Lead to Economic Growth?“, especially the graph. To know if a theory, like tax cuts, is meaningful we have to see if its predictions are working. As my post about Keynesian Paul Krugman indicates, his predictions have been pretty close to right (that unemployment would remain high), while these tax cuts are showing little correlation with improved economic conditions. Nor does the Congressional Research Service conclude tax cuts improve the economy, only that it seems to make the wealthy wealthier.